Crowdfunding: Old wine in new bottles?

5 June 2014

Koen Panis (Loyens & Loeff)

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Loyens & Loeff

• Legal and tax advice second to none• Full-service practice• Innovative and pragmatic• Independent with an international scope• 900 lawyers, tax advisors and civil law notaries• 16 offices worldwide

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ProspectusInvestment companies

FSMA

Permits

Unfair competition

Labour laws

IPCopy right

IP infringements

PatentsUnfair terms

Jurisdiction

Corporate structure

Litigation

Tax

Payment Services

Products

Services

Financial instruments

Financial instrumentsServicesProducts

Donation based

Equity based Debt based

Reward based

IP Tax Finance Corporate Labour

Structuring

One size fits all?

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Who are you?

Project

Access to

Bank lending

Need of

Capital

Product

ExpertiseSize

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Platform

Project

PlatformProject

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Project company BANK

SPV

P P

P

CVBAA1 B1 B2

WATERFALL

C2CROWD

C4C3 C6C5

SH1 SH2 SH3Div Div

100%

10%

Profit participating loan

Distribution Account

C5

100%

Tracking stock

Subordinated loan

Class B shares

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EU – Recognition of the potential

27 March 2014: EU Commission notice“Unleashing the potential of Crowdfunding in the European Union”

• Infrastructure: EUR 1,000,000,000 in projects• SME (funding gap)• Part of the process of desintermediation of banks

- Government funds- Pension funds- Bond market- Crowdfunding

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EU - “Way forward”Promotion crowdfunding• Awareness

- Flemish government: promotion (regulation = Federal level)• Co-Investment• Loan guarantees by governments

- State aid/competition rulesTax incentivesEuropean Crowdfunding Stakeholder Forum• Belgian association of crowdfunding (February 2014)

- Industry sector knowledge- Lobby

Study in 2014New report in 2015

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Donation – Reward – Equity – Debt

• Anti-money laundering- Anti-Money Laundering Directive- E-commerce Directive

• Advertising- Misleading and comparative advertising

• Consumer protection - Directive on unfair commercial practices- Unfair Contract Terms Directive

• Intellectual property protection- (EU) Patent

• EU state aid and competition rules

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EU - “key challenge = lack of transparency on the applicable rules”

Donation – Reward – Equity – Debt

• Prospectus Directive• Payment Services Directive• MIFID• CRD IV• AIFM • Consumer Credit • Distance Marketing of Financial Services• Regulations on Capital Requirements• European Venture Capital • European Social Entrepreneurship Funds

National laws

Belgium

• FSMA notice of 12 July 2012

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FSMA

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Source FSMA - 2012

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FSMA

Source FSMA - 2012

Belgium

• FSMA notice of 12 July 2012

• No specific regulation for platforms (yet) – existing framework remains

• Programmawet: New Section to Prospectus Law of 16 June 2006

- Limit of EUR 1000 per investor/EUR 300,000 per offer

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Offer Instrument Prospectus Limit/Investor Onsales restrictions

FSMA Advertising rules Distribution monopoly

Issuer Distributor

> 100.000

All investments instruments

Yes No Yes Approval Yes No Yes

< 150 persons

All investments instruments

No No Yes No/review No No No

< EUR 100.000

All investment instruments

No No No No/review No No No

< EUR 5,000,000

Shares in Eligible CVBA

No EUR 5000including continuing

offersNo, but…

Review

Yes

Limits ofEUR 5,000,000

EUR 5,000 to be mentioned

No Yes

< EUR 300.000 Only • Securities• Rest category

• No derivatives• … ! Interpretation !

No EUR 1000 including continuing

offers

No, but… Review Yes

Limits EUR 300,000

EUR 1000 to be mentioned

No No

< EUR 5,000,000

Securities in employee benefit

plans

No No No Review YesLimit

EUR 5,000,000 to be mentioned

No Yes

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Prospectuslaw - New “crowdfunding” exceptions

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Questions?Shoot now or see me at the bar

ContactKoen Paniskoen.panis@loyensloeff.com+32 2 773 23 90+32 497 53 38 36